- SOX leads a growth index bounce telegraphed by the Thursday action. - Overall top remains in place, but stocks set to attempt a bounce. - Some new groups getting money indicates the market is still working in some areas, keeping the indices higher for now. - Playing the upside this week until it runs out and the downside sets up once more.
Friday saw the rebound in stocks that the Thursday action suggested. Interestingly, DJ30 and SP500 lagged the growth areas as those indices put in gains well in excess of 1%.
A/D: NYSE 4.1:1, NASDAQ 3.1:1. Strong upside breadth, stronger than even the downside breadth of late.
On a week with many Fed speakers opining about the market underestimating the Fed's resolve for rate hikes as well as the Fed minutes more or less backing up those comments, stocks recovered remarkably well with Friday increasing the odds of a near term bounce for stocks overall with SOX leading the way.
The adage 'sell in May and go away' may have to wait a bit before the market is ready. No question May started with less than great action, but over the past week the indices avoided heavy selloffs when they had reason to sell -- the Fed statement backed up by governors saying the Fed is locked and loaded to hike -- thus showing a fairly good indication investors are not ready to bail just yet. When you layer in the growing number of brokerages, pundits and 'name' individual investors bearish on stocks as well as another week with equity outflows ($5.8B leaving equities the past week), any ability to hold on, much more bounce, shows there is still will to take upside positions.
Of course the Friday bounce was nothing big on the large cap indices and thus the downside still could win out here in May. Perhaps, but many stocks that we are seeing bottom and move higher have already suffered their own bear markets inside the market rise through April. These stocks were still receiving money as of last week and Friday, and indeed we see many more that appear to have money pushing their way. Semiconductors were an obviously visible group late in the week.
Thus, while we still view the market as having built a 1.5 year top and working on what could be the last hurrah before selling off harder, we recognize that there are still stocks getting money pushed their way. Where the money goes, so go prices. That has kept many areas still showing very good action with more good setups coming to the fore. Accordingly, the report sports several new upside plays in sectors that are showing good setups and good moves. We will likely play more downside in the not too distant future, but after banking some good gain to the downside on the week (e.g. COST, KORS, EMR), with stocks bouncing against the sentiment, we will look at some more good upside and let the downside patterns set up once again.
ms THE MARKET
Lots of pessimism from the brokerages, banks, big investors. Put/call ratio remains high. Many are negative on the market and in our view rightly so. At the same time, you have to recognize that the market may not be as ready to sell, just yet, as the pundits are. That is how you get these counter moves to what appears to be the direction the market overall wants to take. The bounce is not set in stone, it just has stocks set up to bounce and many that are starting to do just that. With good patterns setup and moving up, it appears there is money to be made on another move in stocks that are still, as of last week, getting money pushed their way.
CHARTS
SOX: After threatening a break lower two Thursdays back, SOX managed to recover off the sharp break lower, move back over the 200 day SMA, test that move, then jump higher Friday through the 50 day MA's. The failed break down was the key. Now SOX is moving and Friday some good AMAT guidance kept the index moving higher after its turn from the selloff attempt. There as many good chips in position to move higher and make us money, e.g. QRVO, AVGO (flipping it).
NASDAQ: Not out of the woods, but similar to SOX, NASDAQ had opportunities to selloff but did not. Indeed, it has carved out a double bottom at the 38% Fibonacci retracement of the February to April move, a bullish indication. Late in the week, NASDAQ received stronger upside volume (Wednesday and Friday) as it turned higher off the second low. Interesting action as another growth index shows it wants to break higher near term.
RUTX: The small caps bounced Friday off a Thursday doji at the 38% Fibonacci retracement of the February to April move. The index set up a head and shoulders from late March through last week, but it is also trying to use the near retracement as support to launch a move to break up that topping near term pattern. Good start Friday as RUTX was another of the growth indices that saw money move their way.
SP400: Threw a hammer doji with tail Thursday then gapped and rallied Friday, holding the 50 day MA's during the test and putting in a higher low bounce. Gapped lower, gapped higher after a four-week pullback. That action tends to show at least a bit of staying power in the direction of the last gap.
SP500: Still has that toppish head and shoulders pattern formed the past 8 weeks, but is showing similar action to the other indices. Doji test Thursday then a Friday break higher on rising volume. Trying to make that next move but seemingly content for now to let the other smaller indices do the work. Definitely has not broken up the near term head and shoulders, but is refusing to sell.
DJ30: After doing much of the leading upside into April and holding on decently on the first test, DJ30 is struggling, moving upside Friday but not recovering the 50 day MA's. It is lagging and not looking good, but if the other indices rally, it likely follows for a bit.
LEADERSHIP
Semiconductors: Not overpowering with great patterns, but moving up. AMD has a nice pennant set up, and of course AMAT helped lead the equipment stocks higher (KLAC, KLIC). Others look quite good for possible entries: QRVO, AVGO, AMKR, EXAR. Money coming their way as a new group receives money.
Oil: Still some very good action. CWEI broke higher again after its test. WMB breaking higher Friday after a good week upside. ATW testing nicely, ready to bounce again. SWN setting up well for a new move. SPN as well. EVEP, SLAB are others.
Drugs/biotechs: Getting money here as well. RMTI, INCY, JAZZ, PACB, GALE.
Financial: Down Friday but still solid. JPM, MS, C, BAC.
Tech: VMW still working well. FFIV could provide a move this week.
Big Names: Some improvement individually but still struggling overall. AAPL bounced after it was announced BRK.B had bought a bunch of shares; still below the 20 day EMA. SBUX sold on the week. AMZN is fine, NFLX bounced on the week but not a huge move. GOOG is trying to put in a higher low at the 200 day SMA. FB is holding the 20 day EMA and the upper gap point. GOOG may be worth trying another upside play.
MARKET STATISTICS
NASDAQ Stats: +57.03 points (+1.21%) to close at 4769.56 Volume: 1.933B (+6.53%)
Up Volume: 1.54B (+909.72M) Down Volume: 405.33M (-744.67M)
A/D and Hi/Lo: Advancers led 3.12 to 1 Previous Session: Decliners led 2.3 to 1
New Highs: 35 (+16) New Lows: 34 (-60)
S&P Stats: +12.28 points (+0.6%) to close at 2052.32 NYSE Volume: 953M (+3.25%)
A/D and Hi/Lo: Advancers led 4.12 to 1 Previous Session: Decliners led 2.41 to 1
New Highs: 36 (+16) New Lows: 21 (-17)
DJ30 Stats: +65.54 points (+0.38%) to close at 17500.94
16 of 17 over 1.0, 26 of the last 42 above 1.0. Easily enough high ratio readings to bounce stocks and perhaps they are going to make a bounce after this last pullback.
Bulls and Bears: Bulls and Bears moved right back to where they were three weeks back with bulls rising slightly and bears rising slightly. Not so high on the bears to suggest a selloff, still pretty low on the bulls.
Bulls: 40.2 versus 39.2
Bears: 21.7 versus 21.6
Theory: When everyone is bullish and has put all their capital to work, where does the ammunition to drive the market come from? There is always new money to start a new year. After that is used will more money be coming? That is the question.
Bulls: 40.2% 39.2 versus 40.2% versus 44.3% versus 47.4% versus 41.2% versus 45.4% versus 43.3% versus 47.4% versus 44.4% versus 39.4% versus 36.4% versus 34.7% versus 26.5% versus 24.7% 34.0% versus 29.2% versus 26.8% versus 28.6% versus 34.7% versus 36.7% versus 37.8% versus 44.9% versus 41.2% versus 45.4%
Bears: 21.7% 21.6% versus 21.7 versus 20.6% versus 21.7% versus 27.8% versus 27.8% versus 28.9% versus 27.8% versus 30.3% versus 35.4% versus 34.3% versus 35.7% versus 39.8% versus 39.2% versus 38.1% versus 35.4% versus 36.1% versus 35.7% versus 31.6% versus 29.6%
OTHER MARKETS
Bonds (10 year): 1.85% versus 1.85%. Sold hard Wednesday from last week's high, closing out the week with a lateral move at the 50 day MA. Still very much in a four month lateral trading range.
Historical: 1.85% versus 1.85% versus 1.76% versus 1.75% versus 1.70% versus 1.75% versus 1.735% versus 1.75% versus 1.75% versus 1.78% versus 1.74% versus 1.77% versus 1.80% versus 1.87% versus 1.83% versus 1.83% versus 1.86% versus 1.94% versus 1.90% versus 1.88% versus 1.86% versus 1.95% versus 1.79% versus 1.77%
EUR/USD: 1.1216 versus 1.1199. Euro rebounded slightly on Friday after a week of downside took it to a lower low, breaking below the mid-April low. Three weeks downside after hitting a new rally high to start May.
Historical: 1.1199 versus 1.1219 versus 13.1317 versus 1.13145 versus 1.1307 versus 1.13791 versus 1.4252 versus 1.13707 versus 1.13869 versus 1.1405 versus 1.1399 versus 1.14864 versus 1.14864 versus 1.1478 versus 1.15306 versus 1.1450 versus 1.1382 versus 1.1329 versus 1.1293 versus 1.1261 versus 1.2249 versus 1.1289 versus 1.1295 versus 1.1360 versus 1.1317 versus 1.1285 versus 1.1264 versus 1.1278 versus 1.1389 versus 1.1410 versus 1.1397 versus 1.1370
USD/JPY: 110.165 versus 109.985. Dollar up all week, moving through the 50 day MA Wednesday with must modest advances into Friday. Dollar up versus the yen for three weeks off the lower low set to start May.
Historical: 109.985 versus 110.187 versus 109.073 versus 108.856 versus 108.65 versus 108.95 versus 108.47 versus 109.28 versus 108.343 versus 107.10 versus 107.41 versus 107.126 versus 107.312 versus 106.16 versus 106.33 versus 107.36 versus 109.35 versus 111.36 versus 111.79 versus 109.46 versus 109.135 versus 109.06 versus 108.762 versus 109.65 versus 109.29 versus 108.505 versus 107.95 versus 108.175 versus 108.425 versus 109.84 versus 110.45
Oil: 48.48, -0.29. Rallied to a higher recovery high Tuesday, paused into the weekend, testing the 10 day EMA. Pretty normal test of a higher rally high.
Gold: 1252.90, -2.80. After the strong break to a higher recovery high to end April, gold has slid back into the range, holding over the 50 day MA's last week. The Fed's renewed claims it is ready to hike has stolen the near term upside impetus for gold. How it reacts to this 50 day MA test tells the next phase for gold.
MONDAY
Toward the end of the week stocks started to bounce, showing some upside in the midst of all of the pessimism and talk of a looming selloff. Again, we agree with that overall assessment, it is as always, however, a matter of when it occurs.
As is somewhat typical, when so many became so negative, the market tried to bounce. There are still good sectors and good patterns in those sectors that are receiving money. The chips have come back around and drugs/healthcare continue to set up. If new sectors get money, the more the overall market can hold onto gains.
This weekend we are looking at upside plays because we see more than enough areas and stocks getting money and good patterns. After this upside bounce runs its course we can then look at downside as they will be set to resume their moves at that time. Until then we are going to look at some chips, oil, drugs to start with and see what else develops later in the week.
Not sure how long the upside lasts, but as the other sectors getting money have shown, even with the overall market struggling, they have worked well.
Have a great weekend!
SUPPORT AND RESISTANCE
NASDAQ: Closed at 4769.56
Resistance: 4774 is the January 2-15 high 4811 is the November 2014 peak (intraday) 4815 is the December 2014 peak The 200 day SMA at 4816 The 50 day SMA at 4821. Note the 50 day SMA has crossed up through the 200 day MA. The March 2015 lows at 4843 and 4825 4836 is the March 2016 peak 4894 is the September 2015 closing high 4899 - 4902 from the September 2015 peak, July 2015 low 4916 is the mid-November 2015 low 4920 is the lower gap point from mid-October 2015, the January 2016 lower gap point 4960 is the September 2015 intraday high, an important reversal point for NASDAQ. 4999 is the October upper gap point 5007 is the 12/31 upper gap point from that big gap lower 5008.57 is the early March 2015 post-bear market high 5042 is the March 2015 high 5100 from the April peak and early May peak 5162 is the early November peak, 5176 is the December intraday peak
Support: 4751 is the January 2015 lower high 4637 is the February intraday high 4736 is the early January lower gap point downside, the last downside gap in the selloff. 4620 is the February 1 closing high 4615 from September 2014 highs, October 2014 upper gap point, late August 2015 low. 4517-4506 from the September 2015 and August 2015 closing lows 4485 are the twin July 2014 peaks 4471 is the January 2016 closing low 4425 is the late February intraday low 4363 is the February upper gap point 4352 is the March 2014 peak 4313 is the January 2016 intraday low 4292 is the August 2015 low 4212 is the February intraday low
S&P 500: Closed at 2052.32
Resistance: 2062 is the January 2015 lower high 2079 is the intraday all-time high from November 2014 2094 is the December 2014 high, the prior all-time high 2104 is the December 2015 high 2116 is the November 2015 high 2119.59 is the February intraday prior all-time high 2126 was the April prior all-time high 2130 is the June 2015 peak 2135 is the May 2015 all-time high
Support: The 50 day EMA at 2048 2046 is the July 2015 closing low 2040 is the March 2015 closing low 2023 is the November 2015 low 2020 is the September 2015 intraday high The 200 day SMA at 2011 2011 is the September prior all-time high 1995 is the September 2015 recovery peak 1991 is the July 2014 high 1972 is the December 2014 low 1947 is the February 2016 intraday high, the late February peak 1940 is the January 2016 recovery bounce peak closing high 1913 is the early September 2015 closing low testing the bounce from the August selling 1905 is the August 2014 low 1902 from early May was the intraday all-time high. 1897 is the prior all-time high hit in April 2014 1891 is last week's intraday low prior to the miraculous reversal. 1872 is the September 2015 test low of the August low 1867 is the August 2015 low 1862 is the October 2014 closing low 1859 is the January 2016 closing low 1820 is the October 2014 intraday low 1815 is the April 2014 low 1812 is the January 2016 intraday low 1772 are the Q4 2013 highs and lows
Dow: Closed at 17,500.94 Resistance: The 50 day EMA at 17,572 17,748 is the mid-April China margin selloff and the bottom of the 5 month trading range June 2015 low at 17,715 The March low at 17,786 17,978 is the November 2015 peak 18,100 to 18,181: interim peaks in the December 2014 to July 2015 range 18,288 from March 2015 18,351 is the all-time high from May 2015
Support: 17,351 is the September 2014 all-time high. 17,265 is a December 2015 closing low 17,245 is the November 2015 closing low 17,152 is the mid-July post bear market high The 200 day SMA at 17,117 17,068 is the early July 2014 peak 17067 is the December 2014 low 16,970 is the June 2014 former all-time high 16,946 is the June 2014 peak 16,933 is the September 2015 recovery intraday peak 16,740 is the mid-September peak and potential apex for a right shoulder to a head and shoulders pattern 16,736 is a prior all-time high from May 2014 16,670 is the December 2014 peak and the recent August 2015 relief bounce peak. 16,665 is the late August 2015 closing high 16,632 is the April 2014 peak 16,621 is the late February 2016 peak 16,589 is the December 2013 former all-time high 16,526 is the early January resistance 16,511 is the January 2016 intraday high 16,506 is the March 2014 peak 16,466 is the January 2016 recovery closing peak. 16,368 is the August 2014 low 16,117 is the October 2014 closing low 16,058 is the early September 2015 low 16,026 is the April 2014 low 15,855 is the October 2014 intraday low 15,766 is the January closing low 15,666 is the August 2015 closing low 15,450 is the January 2016 intraday low 15,372 is the February 2014 low 15,370 is the August 2015 low
ECONOMIC CALENDAR
May 24 - Tuesday New Home Sales, April (10:00): 521K expected, 511K prior
May 25 - Wednesday MBA Mortgage Index, 05/21 (7:00) International Trade , April (8:30): -$56.9B prior FHFA Housing Price I, March (9:00): 0.4% prior Crude Inventories, 05/21 (10:30): 1.310M prior
May 26 - Thursday Initial Claims, 05/21 (8:30): 275K expected, 278K prior Continuing Claims, 05/14 (8:30): 2152K prior Durable Orders, April (8:30): 0.6% expected, 0.8% prior Durable Orders, ex-t, April (8:30): 0.5% expected, -0.2% prior Pending Home Sales, April (10:00): 0.6% expected, 1.4% prior Natural Gas Inventor, 05/21 (10:30): 73 bcf prior
May 27 - Friday GDP - Second Estimate, Q1 (8:30): 0.9% expected, 0.5% prior GDP Deflator - 2nd, Q1 (8:30): 0.7% prior GDP Deflator - 2nd, Q1 (8:30): 0.7% expected, 0.7% prior Michigan Sentiment - Final, May (10:00): 95.5 expected, 95.8 prior
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